Holding

Contesting an interlocutory application, such as an interim injunction, does not constitute a step in the proceedings that would disqualify a party from obtaining a stay under Section 34 of the Arbitration Act, 1940.

Summary

The dispute arose from a contract between Food Corporation of India and Yadav Engineer that contained an arbitration clause. Yadav Engineer filed a suit seeking a declaration that the contract was subsisting and an interim injunction against the corporation. The corporation appeared, sought time to reply to the injunction application, and then applied under Section 34 of the Arbitration Act, 1940 for a stay of the suit, stating it was ready and willing to arbitrate. The High Court, ignoring a binding decision of its own Division Bench, held that seeking time to reply constituted a "step in the proceedings" disqualifying the corporation from invoking Section 34 and set aside the stay. The Supreme Court held that merely contesting an interlocutory application does not amount to a step that waives the right to arbitration, and that the High Court erred in ignoring the binding precedent. Consequently, the stay order was restored and the appeal was allowed. The Court also emphasized the need for judicial comity when a single judge departs from a binding decision of a Division Bench.

Issues considered

The meaning of "taking any other steps in the proceedings" under Section 34 of the Arbitration Act, 1940.
Whether appearing and contesting an application for interim injunction constitutes a step that disqualifies a party from seeking a stay under Section 34.
Whether a single judge may ignore a binding decision of a Division Bench of the same High Court.

Legislation cited

Arbitration Act, 1940s. 34
Arbitration Act, 1950s. 4
Code of Civil Procedure, 1908s. Order XXXIX, Rule 1, s. Section 115

Subjects

ArbitrationSection 34Interim injunctionStep in proceedingsJudicial proprietyBinding precedentStay of suit

Judgment

95
A

FOOD CORPORATION OF INDIA & ANR.

v.

YADAV ENGINEER & CONTRACTOR B

(l~gust 6, 1982

[D.A. DESAI, A.P. SEN AND BAHARUL ISLAM, JJ.]
'
Arbitration Act 1940-Sectlon 34-scope o/- 1"f(lking any pther steps ~n
c
the proceedings" meaniiJg of-notice of motion taken o~_t by plaintiff for interim
··~ injunction-Defendant appeared and prayed for time to reply-Defendant's actio~
j• whether "step taken in the proceedings''.
'
Practice : atlention of single Judge drawn to a binding decision of Division
Bench of the same High Court-Decision not adverted to--Decision contrary to that D
of Division' Bench-Propriety of.

Section 34 of the Arbitration Act 1940 provides that where_ one oft he
parties to an arbitration agreement commences any legal proceedings against the
other party in respect of any matter agreed to be referred to arbitration, any
party to such legal proceedings may at any t.ime befor~ tbe filing of a. Written
statement or taking any other step~ in the pro<;eedi"'gs apply to· tbe judicial E
authority before whicb the proceedings are pending to st_ay the proceedings and
the authority on being satisfied that the opposite party is ready ~nd willillg to do
ajl things necessary to the proper conduct of the arbitration make an order stay·
ing the proceedings.

The contract entered into by the respondent with the appellant Corpora.
tion for handling and transportation of the Corporation's goods contained an
F
arbitration clause authorising the Managing Director of th¥ Corporation to
appoint an arbitrator in iespect of any dispute ~,rising ou~ 9f tbe CQntr{l.~t
,.-between the parties. ·

Apprehending.breach of contract, the ·respondent filed a suit for a de<"·
laration that the contract was subsisting on. the date of the suit. The respondent G
'prayed- for an ad interim injunction against the Corporation restraining it from
committing breach of the contract. On the notice being issued the District
Manager of the Corporation appeared before tbe Court and sought time to file
reply to the application fQr interim ilijunction. On the next day an application was
filed on behalf of tbe corporation that it was fully ready and· willing to have the
dispute resolved by arbitration under the subsisting arbitration agr~ement and H
prayed that the suit be stared as provided in' 1 section J4 of the Arbilration A<;:t
JM~ .

I
96 SUPREME COURT REPORTS (1983) J S.C.R.

A The respondent alleged that section 34 was inapplicable in ·that when the
District Manager sought time to file a reply to the notice for interim injunction
it was a "step taken in the proceedings" within the meaning of section 34. '

. _Negativing the respondent's plea the Trial Court ,held that . the dispute ·
was covered by the arbitration clause~ It granted stay of further proceedings
in the suit and this view was upheld by tlte District Judge in the respondent's
B· appeal.

In the revision petition filed in the "High Court a single Judge although
his attention was drawn to a 'binding precedent of a Division Bench of the same
High Court supporting the view that an application for filing a reply to the
notice,of motion taken out by the plaintiff for interim injunction was n9t a ''step '
taken in the proceedings", without adverting to that decision, held that an
c application of this· nature was a "step taken in the proceedings''' and that this
'disentitled'the Corporation from invoking the arbitration agreement.

On the question whether, where there is a subsisting valid arbitration
agreement between the parties, entering an appearance and contesting a petition •
!) or notice of motion for interlocutory, order constitutes a "step in tife proc~ed~
ings" as would disentitle· the party to an order under seCtion 34 of the Arbitra·
tion Abt.

Allowing the appeal,

. HELD: Contesting the application' for interim injunction or for appoint·
E- mi:nt of a receiver or for interim relief by itself, without anything more, would
not constitute a "step in the proceedings" as would diSentitle the party to an
order under section 34 of the Arbitration Act. (119 F] •
I. (a) Section 34 envisages that before a party to the arbitration agree·
meat seeks stay of the suit filed' by the opposite party it must disclose its
unequivocal intention to abide by the arbitration agreement; but once the party
F takes steps which may indicate its intention to waive the benefit of the arbitra·
tion agreement or abandons the right to claim the benefit by conduct, such party
would not be entitled to enforce the agreement because there is a breach of the _\
agreement by both parties di$entitJing them to claim any benefit of the arbitra-
tion agreement. (105 DJ

flamji Dayawa/a & Sons (P) Ltd. v. Invest lmpori [1981] l S C.R. 899.
G followed.

(b) The general words "taking any other steps in the proceedings"
follow the specific expression ·'filing a written statemeLt" and both are used for
achieving the same purpose. Therefore the latteT general expression must be
constr,ued e;usdem generis with the specific expression just preceding to bring out
H the alnbit of the latter. The expression "written statement" is a term of specific
connotation ordinarily signifying a reply to the plaint fi]ed by the plaintiff.
[106 Ej
FOOD CORPORATION V. YADA V ENGINEER 97

(c) The expression ;,taking a~y other steps in the proceedings" does not
A
mean that every step taken in the Proceedings would-come "in the way of enforce~
ment of the arbitration ·agreement; the step must be such as ·would clearly and
unambiguously manifest .the intention to waive (he benefit of arbitration agree~
ffient and to acquiesce ill the proceedings commenced again.st the party' and-to
· get the dispute resolved by the court. Inter!ocutory proceedings are incidental
to the main proceedings and stand 'independe~t and alobf of the main dispute. B
.When these interiocutory proceedings are. contested it cannot be said that the
party contesting them had displayed an unequivocal intention to waive thC.--.bene-
fit of the arbitration agreement or that it had submitted to the jurisdiction of
the court. [109 E-H]

Uitar Pradesh 'v. Ja~ki Saran Kai/ash Chandra (1974] 1 S.C.R. 31.• referred
to. c
I
' Sansar Chand Deshraj v. State of Madhya Pradesh AIR 1961 MP 322;
Nuruddin Abdulhusseih v. Abu Ahmed Abdul la/Ii, AIR 1950 Born. 127; Ana.ndkumar
Parmanand Kejrjwala & Anr. v. Kamaladevj Hirai a/ Kejrjwal, AIR 1970 Born.
231; Quee~s College Kanetra & Anr. v. The Co/fe~tor, Varanasi & 'ors., AIR 1974
i
'·.· All. 134; Biswanath Rungta v. Orjental Industrja/ Engjneerjng Co, Pvt. Ltd. & Ors.,
AIR 1975 Cal. 222; State of Gujarat & Ors.v. The Ghanshyam Salt Works AIR 0
1979 Guj. 215; Arjun Agarwal/av. Baidya Nath Roy.& Ors. AIR 1980. Cal. 354;
and M/s. Bhonrila/ Hirala/ & Ors. v. Prdbhu Dayal & A.nr., AIR 1980 Raj .. 97
approved. '

Suha/ Chandra Bhur v. Md. Ibrahim & Anr., AIR 1943 Cal. 484; Amrit-
raJ. Kothari v. Go/cha Financiers, ,AIR rJ966 Cal. 315; P. GannU Rao v. P. Thiaga- E
raja Rao & Anr., AIR 1949 Madras 582 and Ku·nra Malla Reddy v. Soma Srinivas
\ .Reddy & Ors., AIR 1978 A.P. 289, not approved •.

In the_ instant case the District Manager of the Corporation only uppeared
before the court in Obedience to the notice on the notice of motion taken out for
ex parte ad interim injunction and Prayed for time to reply. '(he proceedings of
the court did not disclose· any step having been taken by the Corponilion~in the
F
'proceedings aS would. disentirle the· co·rpora'tion to an order under section 34.
Moreover, the application for stay filed on behalf Of the Corporati_on clearly
stated tha~ the "defendant is ready and Willing 'ichuck' foi- this purpose" which
ineans that it was' ready and willing to 'prOceed with the arbitration when
oommencetl. [119 HJ , .
G
2. If a single Judge hearing a matter is inclined to take a view contrary
to the earlier decision of a Division :(tench of the .same High Court it would be
judicial improoriety to ignore that decision but after referring to the binding
decision he may direct that the papers _ be placed before the Chief Justice of the
High Court to enable him to constitute a larger. division bench to examine the H
question. Judicial comity demands that a binding decision to which attention
had
.
been drawn should neither b~ ignored
~ .
nor over~Iooked,
.
[112·G-H]
' . '
.•
98 SUPREME COURT REPORTS (1983] I S.C.R.

In the instant case although attention of the single Judge was drawn to
the binding decision of a Division Bench of the same High Court be did not
_ refer to it but relied upon ihe decision of another High Court which took the
contrary view.

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 3317
B of 1981.

Appeal by Special leave from the judgment and order dated
the 20th November. 1981 of the Madhya Pradesh High Court" in
Civil Revision No. 696 of 1981.

c K.K. Venugopa/ and S.K. GamiJ.hir for the Appellant.

Soli J. Sorabjee, D.K. Katare and S.S. Khanduja for the
Respondent.

The Judgment of the Court was delivered by
D
DESAI, J. A fond hope that a decision of this Court with the
sanctfon of Article 141 of the Constitution that the law laid down
therein will be the law of the land would put an end to a raging
controversy amongst various High Courts stands to some extent
rudely shaken when the controversy with a slight variation bas again
E' been placed in the lap of this Court. ··
!
For highlighting and then resolving the controversy facts in
dispute have a liltle or no relevance save and except mentioning
certain events. Respondent Yadav Engineer & Contractor, a part-
nership firm fil~d a suit against Food-Corporation of India, !st
F
defendant and Shyam Narain Nigam, District Manager of !st
defendant as 2nd defendant, for a declaration that .the contract .... \
between the 'jllaintiff and the l st defendant for handling and trans-
portation of the goods of the l st defendant Corporation was sub-
sisting on 'the date of the suit an.d restraining the defendant from
G
committing breach of the same by handing over that work to some
one otherthan the plaintiff. The suit was instituted on June I,
1981, in the Court of the III Civil Judge, Class I, Gwalior. In
the suit a notice of motion was taken out purporting to be under
Order XXXIX, rulefl and 2 read withs. 151 of the Code of Civil
H Procedure, for an interim injunction restraining the defendants frow
commit'ting a breach of contract and from interfering with ·the work
\>f handlin~ and transport of goods of the !st defendant Corpora-
FOOD CORPORATION v. YADAV E~OINEER (Desai, J.) 99

A
tion by the plaintiff during the pendency of the suit. On the notice
. of motion being taken out the Court directed notice of the same to
be served and the· same was made returnable on the .next day,
June 2, 1981. On the returnable date the 2nd defendant, District
Manager of the !st defendant Corporation who had .office in the
City of Gwalior was served and . he appeared through one Shri N.K. B
Modi, Advocate, filed the letter of authority (Vakalat) in favour of
the learned advocate on behalf of 2nd. defendant and the l~arned
advocate prayed for time for 'reply and arguments to the plaintiff's
application for temporary injunction'. The court acced~d to the
request and posted the matter on June 3, 1981. An endorsement
appears in the record that the I st defendant Food Corporation of
India was not served though the , endorsement reads 'absent'.
However, the last line in the proceeding makes it clear that the case
was posted on June 3, 1981' 'for reply argumennts and awaiting
service on June 3, 1981'. When- the matter came up on the
·next day, i.e. June 3, 1981, an application. was moved
'
on· behalf· of
!st defendant inviting the attention of the Court to ·the subsisting D
11rbitration· agreement between the ·plaintiff and the !st defendant
and which agreement authorised the Managing Director of the !st
defendant to appoint an arbritrator in respect of any dispute
arising out of the contract between the plaintiff and the lst defen-
dant. It was-also stated that the !st defendant desires to have the
dispute, if any, resolved by arbitration under the subsisting arbitra- E
tion agr,eement and that the defendant is fully ready and willing
(ichhuk) to go to arbitration. · The application concluded with a pra-
_y_er th.at under the circumstances the suit may be stayed as provided
in s. 34 of the Arbitration Act, 1940 ('Act' for short);
F
The learned trial Judge was of the view that the dispute bet-
ween the parties is covered by the arbitration agreement set out in
Article 19 of the contract between the plaintiff and the !st defendant.
The learned Judge negativeq the contention that.an application ·made
by the 2nd defendant for filing reply to the notice of motion taken G
out by the plaintiff for interim injunction is a step take11 in the
proceedings in view of the binding decision of a Division Bench of
~ .. -·•. the Madhya Pradesh High Court in Sansar Chand Deshra}v. State
of Madhya ,Pradesh.(') The learned judge accordingly ~ranteq stay

(1) A.I.R. 1961 MP 322.
I

'
100 SUPREME COURT REPORTS (1983] I S.C.R.

A of further proceedings in the suit as prayed for on behalf .of the
!st defendant. Plaintiff preferred an. app~al in the Court of the '· "'
District Judge, Gwalior. The learned ITI Additional District Judge,
before whom the appeal came up for hearing, agreed with the view
taken by the learned trial judge and confirmed the order. granting
stay of further proceedings in the suit and dismissed the appeal..·
B Undaunted even by this second rejection plaintiff approached the High
Court in revision under s·. 115 of the Code of Civil Procedure. The
learned judge, though his attention was drawn to the binding deci-
sion of the Division Bench of the same High Court, did not refer to
it in the judgment and relied upon a decision of ihe Adhara Pradesh
/
High Court in Bajaj International v. Indian Tobacco Suppliers(')
c 11nd held that an application for filing reply to a notice of motion
•
for interim injunction is a step taken in the proceeding, which would
disentitle the party from invoking the arbitration agreement. In
support of this conclusion the learned judge also .relied upon Abdul
Qudoos v. Abdul Gani,( 2) which decision clearly does not support
any such proposition. The learned judge further observed that even
D
if the view that the application filed by the 2nd defendant praying
for time to reply to the notice of motion for interim injunctioµ may
not be treated as a step in the proceeding, yet the 1st . defendant
would not be entitled to a discretionary order under s. 34 of the Act
on the·gro1md that one of the conditions necessary for invoking the
jurisdiction of the court under s. 34 is not satisfied inasmuch as
nowhere in the application the !st defendant bas stated that the • •
!st defendant at the time when the proceedings were commenced
and still ·remains ready and willing to do all things ne.cessary for
the proper conduct-0f·the arbitration. For this additional reason
which was never urged on behalf of the plaintiff either in the trial
F court or in the 1st appellate court and as would be presently pointed
out which is contrary to the record the High Court interfered
•
in revision, rSet aside the order of the trial court granting
\·
stay and confirmed by the appellate 1>ourt and rejected the applica-
tion for stay of proceedings in tbe suit. Hence this appeal by spe-
cial leave.
G
Section 34 of the Act reads as under :

"34. Where any party to an arbitration agree- .l- •'
ment or any person claiming under him commences
H
(I) 'AIR 197.8 AP 8.
(2)JA.Ul.. 1954 Na~. 33Z,
..
!i9ob .CORPORATiON v. YADAV ENGi~EER (besal, J.) 101

any legal proceedings against any other party to the
agreement or any person claiming nnder him in res-
pect of any matter agreed to be referred, any party to
, such legal proceedings may, at· any time before filing a
..
written statement or taking any other steps in the pro-
ceedings, apply to the judicial authority before which B
the proceedings are pending to stay the proceedings;
, and if satisfied that there is no snfficient reason why
the matter should. not be referred in f1Ccordance with
the arbitration agreement and that the. apP,licant was,
at the time when the proceedings. were commenced,
, and still remains, ready and willing to do all things c
necessary to the prop.er conduct of the arbitration, ·
such authority may make an order staying the pro-
ceedings."

The contours of the controversy are confined to one of the nega- D
tive requirements of s. 34 to be fulfilled by a party seeking the
discretionary relief of stay of proceedings to qualify for the same.
It is not necessary .to reproduce all the relevant conditions for
attracting the application of s. 34. One of the conditions to be
·satisfied before an order under s. 34 can be obtained is that the
party to the legal proceeding has at any time before filing a written E
statement or ta)<:lng any other s'teps in the proceedings applied to the
judicial authority for stay of proceedings. In other words, a party
, seeking stay of proceedings must move the court with an application
under s. 34 before filing the written statement. to the suit or before
taking any other steps in the proceedings. Admittedly, application
in the present proceedings · was filed before fili~g the written F.
.statement. The q'uestiori is whether the .second pre-condition is
satisfied in that the applicati-On under s. 34 was filed before taking
any other &teps in the proceedings. What does the expression 'before
.taking any other steps in the proceedings' signify? Before ascertaining
the scope and ambit of the expression it would be worthwhile to
briefly narrate the raison d'etre for prescribing this condition. G
. '

. - Ordinarily as provided in s. 9 of ;he Code 'or Civil Procedure
all suits of a civil nature except suits· of which cognizance is either
expressly or impliedly barred would be triable by the cou~ts set up H
for the purpose. If the dispute is of a civil nature the forum is one
or the other court set up for the purpose. The State courts have been
\
SUPREME CoURT REPORTS U9s3i i s.c.a.
A
set up fdr an easy access by persons who seek resolution of their
disputes. They must be disputes of civil nature and the cognizance
of which is not either expressly or impliedly barred. Civil courts
set up by the State having defined jurisdiction will be the forum for
resolution of such disputes. Ordinarily, therefore, whenever a
dispute· of a civil nature arises the party Claiming relief would
B
approach the court having jurisdiction to resolve the dispute._ The
party against whom relief is sought will be informed of the cogni·
zance of the dispute being taken by the court and it must come forth
and either concede that the dispute is genuine in whole or in part or
• defend the action. Sometimes a dispute as to jurisdiction, territorial
c Or· pecuniary, is raised hut apart from such specific exclusions
claimed by a party civil courts are set up .with the object of resolving
civil disputes. A forum thus may readily be available and presumed to
be easily accessible. This is the prescribed mode of·ac~ess to justice.
Arbitration Act carves out an exception to the general rule that the
forum for resolution of civil disputes is the civil court having jurisdic- t

D tion to deal with the same by providing that the parties to a dispute
by agreement unto themselves may choose a forum of their choice
for settlement of disputes between them in preference to the State
Courts. Undoubtedly, for making these agreements enforceable
sanction of law is necessary. · That is the object underlying the Act.
Industrial revolution bringing into existence international commer- ·
E cial transactions led to a search for finding a forum outside the
municipal law courts ·involving protracted and dilatory legal
process for simple, uninhibited by intricate rules of evid.ence and
legal grammar. This explains resort to forums for arbitration at
international level. No two contracting parties are under any legal
obligation to provide for an arbitration agreement. · If the parties
F enter into an arbitration agreement implying that they would like
• that the disputes covered by the agreement will be resolved by a
• •
forum of their choice, the approach of the court must be that
parties to the contract ar; held to their bargain. If in breach or
derogation of a solemn contract a party to an arbitration agreement
approaches the court and if the other side expeditiously approaches
G the court ·invoking the court's jurisdiction to stay the proceedings so
that by this negative process the court forces the parties to abide by
the bargain, ordinarily the court's approach should be and has been
to enforce agreements rather than to find loopholes therein. More
often it is found tbat solemn contracts are entered into on the
H clearest understanding that any dispute arising out of the contract
\
FOOi> CORPORATION v. YADAV ENGINE~R (Desai, J.J JM
A
aQd covered by the contract shall be referred to arbitration. It may
be that one or the other party may not have entered into the contract
in the absence of an arbitration agreement. Therefore when in breach
.
of an arbitration agreement a. party to. the agreement rushes to the
·court, unless a clear case to the contrary is made out the· approach
of the court sl,iould be to hold partie~ to their bargain provided B
necessary condition§ for invoking s." 34 are satisfied.

Arbitration Act prescribes various methods by which an arbit·
ration agreement can.be enforced. Section 20 enables parties to an
arbitration agreement to approach the Court in the ci.rcumstances
therein mentioned for a direction that the agreement be filed in the c
court and on suth agreement being filed the Court is empowered to
make an order of reference to the arbitrator. Provisions of Chapter
IV provide for arbitration in. suits. Section 34 prescribes one other
method of enforcing arbitration agreement if a party' to an arbitra-
} tion agreement in breach' of it approaches the court and files a
suit in respect of a dispute covered by the arbitratfon agree- D
ment.
.
Section 34 prescribes a method by which the other party to
the. arbitration agreement bY. satisfying the conditions·prescribed in
s. 34 can enforce the arbitration agreement by obtaining an order E
·of stay of the suit. It is crystal clear that once the suit is stayed the
. party who in breach _of the arbitration agreement approaches the
court for relief will be forced to go to arbitration and thus the court
by this negative attitude of declining to proceed further with the
proceedings brought before ·it would enforce the arbitration agree-
ment. In order, therefore, to satisfy the court that the other party F
\) to the arbitration agreement who would be defendant in the suit is
ready and willing to abide by the arbitration agreeme.nt and ready
to take all steps necessary for the proper conduct of the arbitration, ·
it must show that it is not waiving or abandoning its right under
the arbitration agreement or submitting to the jurisdiction of the
court thereby accepting the forum selected by the plaintiff for resolu- G
tion of dispute and acquie.scing in it. In order to steer clear of this
charge the provision is made in s. 34 for a:n application by the party
who is brought to the.court by the opposite party in breach of the
• arbitration agreement io apply for stay before filing the written
H
statement or before taking any other steps in ~he proceeding. This
104 slli>RBMB COURT REPOll.ts [198j) I s.C.Il.
A explains the purpose and object underlying the provision contained
in s. 34. /

The contention and the resultant issue in.dispute must now be
neatly framed. The primary-issue is: what action on the part of the·
defendan_t who is- sued in a court of law and-Who has a subsisting
B valid arbitration agreement with the plaintiff, would_ constitute step
in the proceeding so as to disentitle him to stay of the suit which,
if granted, would enable ·him to enforce the arbitration agreement ?
Would entering an appearance and contesting petition or notice of
motion for interlocutory order constitute ·such step in the s~it or
c proceedings as would disentitle the party to an order ·under s. 34 ?
The subsidiary point is, whether where in a suit filed in a court, a
prayer for an ex parte ad interim injunction is made either by an
application or by .a notice of motion or an application is made for
appointment of a receiver and either . ex parte ad interim injunction
is granted or. ex parre receiver is. appointed and the copies of the
D pleadings and the order are served upon the defendant, if the
defendant appears and requests the-court either to ·vacate the injunc-
tion or discharge the receiver or modify the orders"witbout filing a
· written· statement or making an. application for filing a written state-
ment to the plaint, could be be said to have tak_en a step in the
proceedings so as to disentitle him from obtaining stay of the
E ,suit ? ,

Let the precedents rest for the time being and let an attenipt
·'
be. made to ascertain the underlying intendment in enacting the
conditibµ in s. 34 which prescribes a mode of enforcing the arbitra-
F tion agreemenf to the effect that if a party to an arbitration agree-
ment commences an action. the other party to the agreement, if)t
desires to enforce the agreement, may seek stay of the suit before
either filing written state~ent or taking "other steps in the proceeding.
Ordinarily the court would respect the sanctity of contracts: A
valid arbitration agreement between the parties obliges bot~ the
G parties to the . agreement t9 ' act according to the terms of the
agreement. A valid arbitration agreement envisages resolution of·
dispute by a forum of the choice· of the parties and displaces the
state courts. Ordinarily, a party to a valid arbitration agreement
is not entitled unilaterally to commit a breach of the agreement or
tt· ignore the agreement. Now, if a party to an arbitration agreement
bas a· dispute to be resolved arisia·g out of the contract i.n which the
arbitration ~greement is incorporated and instead of invoking the
Moo CORPORATION v. YADAV ENGINEER (Desai, J.) 105

· arbitratfon agreement- by inviting the parties to. appoint the arbit.rator.
A
it rushes to the court.in breach of the _agreement and files a suit, the
other party is undoubtedly entitled to enforce the agreement. True,
the other party is equally entitled to waive the benefit of the arbit·
ration agreement. If the other party desires to waive' the benefit of
the agreement it can appear in the suit and contact the suit. Such
B
· conduct would. demonstrably, show that both the parties have waived
the b~nefit flowing from the arbitration .agreement of getting the •
dispute between them resolv.ed by a forum of their choice. But if .
the first party in breaph of the agreement files a suit the other party
to the agreement . must have an option and opportunity to enforce
the arbitration agreement. Section 34 prescribes a mode. and method
of enforcing the arbitration agreement. When a party to the agree·
c
ment has filed a suit in breach of the -agreement and' the other party
to the agreement is dr~gged to the court, by staying .the suit at the
' l ·instance -of the other party so dragged to the court the first party
consequently would be forced to honour the arbitration agreement ..
But before the other party to the arbitration egreement is entitled to D
enforce the arbitration agreement· by stay of the silit it must disclose
·its unequivocal ihtention to abide by the agreement and, therefore,
s. 34 obliges such a party to ask for stay of the proceedings before
- such a party takes any steps which may unequivocally. indicate the
intention to waive the benefit of the arbitration agreement. Abandon-·
ment of a right. to seek resolution of dispute as' provided in the E
arbitration agreement must be clearly-manifested by the-step taken by,
such party. Once such unequivocal intention is declared or abandon-
ment of the right to - claim the benefit of the agreement becomes
manifest from the conduct, such party would then' noi'be entitled
,, to enforce the arbitration agreement because. there is thu_s a breach
of !he agreement by both the par)ies disentitling both to claim any F
benefit of the arbitration agreement. ·section 3:4 provides that a
party dragged to the court as defendant ·by another P.arty who is a
party tci the arbitration agreement must ask for stay of the proceed-
ings· before filling the written statement· or before takfog,any pther
step in the proceedings. That party must simultaneously show its
readiness and , willingness to do- all things necessary to the proper G
conduct of the arbitration. The legislature by making it mandatory
on the party seeking benefit of the arbitration agreement to apply
for stay of the proceedings before filing the written statement or
before taking any other steps in the proceedings unmistakably poln·
ted out that filing of the written statement discloses such conduct on, H
'
106 Si:JPREM~ coi:JRt REPORTS [1983) i s.c.k.
A the part of the party as would. unquestionably show that the party
has abandoned its rights under the arbitration agreement and bas
disclosed an unequivocal intention· to accept the forum of the court
for resolution of the dispute by waiving its right to get the dispute
resolved by a forum contemplated by the· arbitration agreement.
When the party files written statement to the suit it discloses its
B defence, enters into a contest and invites the court to adjudicate
upon the dispute. , Once .the court is invited to adjudicate upon the
dispute there is no question of then enforcing an arbitration agree·.
· ment by forcing the parties to resort to the forum of their choice
as set out in the a.rbiJration agreement. . This flows from the well
c settled principle that the court would normally bold the parties
to the bargain (see Ramaji Dayawala & Sons (P) Ltd. v. Invest
Import).(') .·~

Apart from filing .written statement, what other step did the
legislature contemplate as 1being t.aken in the proceedings which·
D would disentitle the party to the suit from obtaining stay of the
· pr~~eedings which would have the effect of enforcing the arbitration
agreement ? General words 'taking any other steps in the proceed- .
ings' just follow the specific expression 'filing a written statement'
and both are used for achieving the same purpose. Therefore, the
latter general expression must be construed' ejusdem generis' with the
E specific expression just preceding to bring out the ambit of the latter
Expression 'written statement' is a term of speCific co~notation
.J
ordinarily signifying a reply to the plaint filed by the plaintiff.
Therefore, the expression· 'written statement' in . s. 34 signifies a
Lpecific thing, namely, filing an answer on merits to the plaint filed
by the plaintiff. This specific word is followed [by general words
F 'taking any other steps in the proceedings'. The principle of
·ejusdem generls. must help.-in"finding·out the import· of the general
words because· it is a well established rule in the construction of
statutes that general terms following particula(ones apply to .such
persons or things as are ejusdem genefis with these comprehended
in the language of the legislature. In Ashbury Railway ·
G
Carriage & Iran Co. v. Riche,(') the question of construction
of the object of a Company : 'to cllrry on business of mechanical
engineers and general contractors', came in for consideration and

H o> [19811 1 s.c.R: 89!f.
(2) (1875) L.R. 7 H.L. 653.
• 4'

FOOD.CORPORATION v. YADAV ENGINEER (Desai, J.) 101 ·
~·

it was said that the generality of the expression 'general contractors' A
was limited to the previous words 'mechanical engineers' on the
principle ~f ejusdem generis. Filing of the written statement would
disentitle the party from seeking enforcement of arbitration agree-
ment by obtaining stay of proceedings because it is such an ~ct/on
behalf of the party entitled to enforce the. arbitration agreement .
which would disclose unequivocal intention of the party to give· up B
the benefit of the arbitration .agreement and accept the method in
preference to the one set out in the arbitration agreement to the one
· adopted by the other party by filing the suit and get the dispute
adjudicated upon· by the machinery of the court. If this is the
underlying intendment in providing that application for stay of the
proceedings must be filed before the filing of the written statement, · c
the same conclusion must follow when instead of filing the written
statement the party has taken some other step in the proceedings.·
That some other step must indisputably be such step as would
manifestly display an unequivocal intention to proceed with the
}
• suit and to give up the right to h,ave the. matter dtsposed of by
arbitration. Each an.d every step taken in the proceedings cannot D
come in the way of the party seeking to enforce the arbitration
agreement by obtaining stay of proceedings but th~ step. taken by
the party must be such, step as would clearly and unmistakebly
indicate an intention on the P.art of such party to give up -the
benefit of arbitration agreement and to acquiesce in the proceedings
E
commenced against the party and to get the dispute resolved by the
court. · A step taken in the suit wh~ch would disentitle the ·.party
from obtaining stay of proceeding must be such step as would
.display an unequivocal intention to proceed with the suit and to
abandon the benefit of the arbitration agreement or the right to
get the dispute resolved by arbitration;. F
' J If the step in the proceedings contemplated by s. 34 must be
such step as would clearly, unambiguously and unequivocally disclose
the intention of the party taking the step to give up the benefit of the
arbitration agreement or its right of getting the dispute resolved by
arbitration and to acquiesce in the methodoiogy of resoluution of G
dispute by court, would an· appearence' in the suit for contesting
interlocutory applications such as application for appointment of
...1. ~' receiver or ex parte ad interim injunction, mandatory or· prohibitory,
and contesting the same be a step which would disclose an unequi-
vocal intention to proceed with the suit and to give up the benefit H
!OS sui>REME COURT REPOilts (1983) i s.C.R.
A of ihe arbitration agreement? That is the controversy in the appeal
before us.

Arbitration agreement generally provides for resolution of
disputes either present or future by a forum of the choice- of the
B parties. Ordinarily, arbitration agreement· finds its place in con-
tracts, Apprehending that while preforming contract some disputes
may arise, care is taken to incorporate an arbitration agreement in
the contract itself prescribing the forum for resolution of such
disputes. To illustrate, partnership contracts incorporate arbitra-
tion agreement for resolution of disputes arising out of the con-
c tract of partnership. Building contracts these days incorporate
arbitration agreements. International · commercial transactions also
incorporate arbitration agreements. The purpose underlying
_ entering into arbitration agreement is to provide for resolution of.
disputes arising from the contract between the parties. Now, if a
party to an arbitration agreement files a suit seeking relief in respect
D of disputes arising from 'the contract-the other party to the agree-
ment can either waive tb-e benefit of the arbitration agreement and
acquiesce in the suit or enforce the arbitration agreement. Such
conduci has specifically to be ·in relation to disputes covered by
arbitration agreement. But if a party to an arbitration agreement
files a suit ~nd simultaneously moves an inteilocu\ory application
E such as an application for appointment of receiver, usually to be
, found in- suits for dissolution of partnership and rendering accounts, '
or for an interim injui1ction to ward off a threatened or continuing
breach of contract, irreparable harm would be suffered by the other
party-to the arbitration agreement if it cannot contest "the interlocu- .
tory application on the pain of abandoning the benefit of aJbitration
F agreement. A concrete illustration would be both illuminating and
convincing. In a suit for dissolution of partnership an~ accounts an
application for appointment of receiver as also an application for
interim injunction restraining the defendant .from u_sing the partner- -
ship goods or assets for continuing the busfness are filed. The court
G passes ex parte interim order a·nd issues notice calling upon the
defendant to show cause why the same should not be made
. absolute. In-a running business appointment of a receiver would
thoroughly dislocate the 'business and an injunction would bring to
standstill th~ fl~urishing business. If the defendant appears and
H contests th~ application for appointment of receiver as also the
application for injunction, could be be said to display an unequivocal
FOOD CORPORATION v. YADAV ENGINEER'(Desal; J.) 109
A
~· v' intention to give up the .ben~fit of the arbitration ·agreement and to
acquiesce iii the suit? The dispute between the parties is whether
the partnership should be dissolved as per the contract of partner- '
ship. Interim injunction applicatio~ or application for appointment ,
of receiver have nothing to do ·directly of substantially with the
terms of the partnership. The. main or substantial dispute /
will be B
covered by the plaint filed in lhe suit. Incidental proceedings for:
appointment of receiver o'r for interim injunction ar~ for the pro-
tection either of the property or, the interestsof the parties. Now,
when. ex parte orders are obtained on ex parte avermerits the other
party cannot be precluded from coming and pointing: out that no
case is made out for granting interim reiief. It would be too cum, c
.
·~,·• bersome to expect the ·party first to apply for stay and then inviie
the court under s. 41 {2) of the Act to vacate the injunction or to.
discharge the receiver, Giving the expression 'taking any 0th.er steps .
. in the proceedings' such wide connotation as making an application ·
j
for any purpose in the suit .such as vacating stay, dischar£e of the
receiver or eyen modifying the interim orders would work hardship 0
and would be inequitousJo the party who is willing to abide by
the arbitration agreement and yet be forced t-0. suffer the inequ\ty
of ex parte orders. Therefore,· the expression 'taking any other
steps in the proceedings' must be given a narrow meaning in that
the step· must be taken in the main proceeding of the. suit and it
must be such ,step as would clearly and unambiguously manifest the E
·fotention to waive the benefit of tlle· arbitration agreement and to
acquiesce in .the proceedings. Interiocutory proceedings are · inci-
dental to the main proceedings. They liave a life till the disposal
of the main proceeding. As the suit or the proceeding is likely to
take some time before the dis'pute in the suit is finally adjudicated,
more often interim orders have to be macie for the protection of the F
rights of the parties. Such interlocutory proceedings stand inde-
pendent and aloof of the main ,dispute between the parties involved
in the suit. They are steps taken. for facilitating the just and·
fair disposal of the main dispute. When these interlocutory
. proceedings are contested . it cannot be said that the party contesting
such proceedings has· displayed an unequivocal intention to ··waive G
.'
the benefit of the arbitration agreement or that it has submitte.d
to the jurisdiction of the court~ WI;en ,; parte orders are made
at the back of the party the other party. is forced to .c6me to /·
the
9ourt to vindicate its right. Such _compulsion cannot disclose an'
· unambiguous intention to give up .the \benefit of the. arbitration H
110 SUPRBMB COURT REPORTS [1983] I s.c.tt.
A
'
.
"'agreement. Therefore,. taking any other steps in the proceedings
must be confined to taking steps in the proceedings for resolution
of the substantial dispute in the suit. Appearing and contesting the
interlocutory applications by seeking either vacation thereof or
modification thereof cannot be said to be displaying an unambiguous
B intention to acquiesce in the suit and to waive the benefit of the
arbitration agreement. Any other view would both be harsh and
inequitous and contrary to the underlying intendment of the Act.
The first party which approaches the, court and seeks an ex parte
interim order has obviously come to the ·court in breach of the
arbitration agreement. By obtaining an ex parte order if it forces the
other party to the agreement to suffer the order, or by merely con·
testing be imputed the intention of waiving the benefit of arbitration
agreement, it would enjoy an undeserved advantage. Such could not
be the underlying purpose of s. 34. Therefore, in our opinion, to
effectuate the purpose underlying s. 34 the narrow construction of
the expression ·'taking any other steps in the proceedings' as herein- ·I
D above set out appears to advance the object and purpose underlying
s. 34 and the purpose for which the Act was enacted .

• •
. Having · examined the contention on the language of the
statute, the setting in which it is placed, the underlying intendmeni
E and the purpose it seeks to s~rv~, let us turn to precedents. There
is a clear cut cleavage and divergence of opinion amongst various
High Courts. Allahabad, Bombay and later decisions of , Calcutta
High Court, Gujarat, Madhya Pradesh and Rajasthan High ·Courts
have taken the view that appearing and contesting interlocutory
application is not a' step taken in the proceedings so as to disentitle
F the party from taking benefit of the arbitration agreement by seeking
stay of the suit. On the other hand, earlier decisions of Calcutta \ '
High Court, Delhi and Madras High Courts have taken .a contrary
view.

G In Born bay there bas been a reference to a practice com-
mended to us by Mr. Sorabji, learned counsel for th.e respondent
that to avoid the pitfall of s. 34 even while contesting an inter-
locutory application the party seeking to enforce the arbitration
agreement must enter appearance under protest. This practice
H · not only does not commend to us, but . way back in Nuruddin
FOOD CORPORATION v. YADAV ENGINEER (Desai, J.) 111
A
.Abdulhussein v. Abu Ahmed Abdul Jalli,( 1 ), Tendolkar, J. has
rejected it as one of the doubtful legal import and utility. One must
construe the section on its own language keeping in view the purpose
and object of tfie enactment. One cannot add to the requiremen.t
- by introducing a practice brought. into vogue by 1Solicitors in
Bombay, whev no such practice ,exists elsewhere. in the -country. B
Section 34 is even invoked in rural backward areas. The highly
·skilful solicitor's draftmanship cannot provide as escape route to an
unwary litigent. We are, therefore, not disposed to accept the sug-
gestion that in order to avoid any pitfall of being denied the benefit
of arbitration agreement the party seeking to enforce the agreement
must enter an appearance under protest because we. affirm what c
Tendolkar, J. has said. It reads as under :
~
I
"It appears to me therefore that the addition of tbe
words 'under protest' to an appea~ance filed in court
in cases not covered by 0. 30, R.S. Civil P. C., is
meaningless when neither the jurisdiction 'or the Court D
nor the validity of the writ or service is challenged.
H is not challenged where a defendant. files an·
-appearance under protest under the prevailing practice
because he desires to apply for stay under the Arbitra-
tion Act. Therefore, whatever may be ,the reason
E /
for the practiee which has grown up; it seems to rrie
clear-that there is no obligation on the defendant to
follow this practice of doubtful import and utility
and he is at liberty'· to file an · unconditionaJ.
appearance.''
F
.J Before we turn to the only decision of this Court in State
of Uttar Pradesh v. Janki Saran Kai/ash Chandra,(') which ai one
stage was expected to resolve the controversy, we may briefly' refer
to the decisions of the various High Courts to which our attention
was drawn.
. . G
_ We would first refer to the decisions ·which take the view that .
app~arin.g to contest interlocutory application either for vacating
the mtenm orders .or modification of the same does not constitute a

(l) AIR 1950 Born. 127.
H .
(Z) [1974) I S.C.R. 31.
I
112 SUPREME COURT REPORTS ' [1983] ! S.C.lt.

A step in the proceedings which would disentitle the party to .an order
. of stay under s. 34. In Nuruddin Abdulhussein, (supra) learneil single
judge of the Bomliay High Court held that the true test for determi-
niµg whether an act is a step in the proceedings is not ~o much the
question as to whether it is an application-although, of course,
that would be a satisfactory test in many cases-but whether the act
B displays an unequivocal intention to proceed with the suit and to
give up the right io have the matter. disposed of by arbitration. In
reaching this conclusion the Court relied upon Pord's Hotel Co. -v.
Bartlett,(') where Lord Shand observed. as under;

c ·, _ '.' ... this appears to me to have been in effect an
abandonment of the ·proposal to have the subject of the
- cause disposed of by arbitration" .•

The contention that when the defendant filed an unconditional
D appearance, presumably having reference to the practice that had
grown up in Bombay High Court of appearance under protest. it
was a step in th~ proceeding as contemplated by s. 34 was negatived
and stay was granted. In Sansar Chand Deshraj, (supra) a Division
Bench cif the Madhya Pradesh' High Court approved the decision in
Nuruddin Abdulhussein, and held that mere filing of a reply to an
E application for interim relief by way· of appointment of a receiver or
for issue of an injunction does not constitute a step in the proceed-
ing which would indicate that there .;, in effect abandonment of the
. proposal to have the _subject of cause disposed of by arbitration. It
may be pointed out here that the Division Bench decision of the
Madhya Pradesh High Court which wa' in terms binding on the
F learned Judge of the High Court; and H was specifically submitted .,
to us that even though the attention of the learned judge was invited
he-neither referred to it nor distjnguished it. Times without number
this Court has observed that considerations of judicial propriety
and decorum require that if a learned single Judge hearing a
matter is in~Jined to take the view contrary to the earlier
G decision · of a Division Bench -of the same High Court, it
would be 'judicial impropriety to ignore that , decision but after
referring to the binding decision he may direct that the papers be -.. <
placed before the Chief Justice of the High Court tci enable him to
H constitute a larger Bench to examine the question. Judiciai"Comity

.(!) [1896] A.C. \,
FCOD CORPORATION v. YADAV ENGINEER (Desai, J,) 113

deman.ds that a binding decision .to which attention has been drawn
A
should neither be ignored nor overlooked (see Mahadeo/al Kanodia v..
The Administrator General of West Bengal,(') Sh~i Bhagwan & Anr v."
Ram Chand & Anr., ( 2 ) and St~te of Gujarat v. Ramprakash P. Puri ·
& Ors). (8).
. /., B
Jn Anandkumar Parmanand Kejriwala & Anr. v. Kama/adevi
Hiralal Kejriwdl,(I) a Division Bench of the Bombay High Court
approved the decision of the learned single judge in Nuruddin Abdul·
hussein and observed that the test of making an application being
• styled as the step in the proceedings is neither a sok t<;st nor a
conclusive test and what is such, a step. in the ·procee\!ings has been
settled by the decision of Tendolkar, J. The defendant having filed
'r'· '
.
appearance under protest and reserved the right to move the Court
for referring the dispute to arbitrat!on, contested the notice of,
motion take.n out for appointment of receiver and injunction in both .
of which ex parte order was made would not constitute a step in
' the proceedings as would disentitle the defendant to an order under D
s. 34.·

Jn Queens College Kanetra & Anr. v, The Collector, Varanasi
·. &. Ors.,(') the defendant first applied for stay of proceedings under
s. 34 and after the court granted stay of proceedings requested the
co~rt that the ex parte ad interim injunction be vacat@d. Two ·ob· E
jections .were taken on behalf of the plaintiffs to this request of the
d<;fendant. One being that when the suit is stayed the· court
bas no jurisdiction to deal with any part of the suit and secondly
that' if the application for ad interim injunction had been contested
bef'ore obtaining stay of the suit it would have been a .step in the .
·suit and the defendant would not have been entitled to an order for
.IJ
stay of the suit and, therefore, his action 'Constituted a step in the.
proceeding. The Court negatived both the contentions and observed
that there could be no doubt th~t the act of the defedant to get an ·
· ex parte order of injunction vacated does not indicate ~n unequivo-
car intention to proceed with the siiit and to give up the righi to
G
'
(I) [!960] 3 SCR 578.
(2) [!965] 3 S.C.R. 218 at p, 228.
(3) [1970] 2 S,C,R, 875.
(4) AIR 1970 Bo.m. 231.
(5) AIR 1974 AU. 134.
114 SUPREMB COURT REPORTS [1983)' 1 S.C.°!"•

A have the matter disposed of by arbitration. In reaching this conclu-
sion the Court approved the decision of the Madhya Pradesh High ~ ~
Court in Sansarchand and the decision of the Punjab High Court in
M/s. Charandas & Sons v. M/s. Harbhajan Singh Hardit Singh.(')

In Sri Ram Shah v. Mastan Singh & Ors.,( 2 ) a Division Bench
B of Allahabad High Court approved the decision in Queens College
Kane tra.

In Biswanath Rungta v. Orlential Industrial Engineering Co.
Pvt. Ltd. & Ors.,(') a learned single Judge of the Calcutta High
'
c Court after referring to the decision '
of this court in Janki
Kailashchandra held that when the defendant sought to circumvent
Saran
~
the ex parte injunction obtained by the plaintiff he could. not be said "'
to have taken such a ste;; in the proceeding a> would disentitle him
to a relief under s. 34.

D In Stata of Gujarat & Ors. v. The Ghanshyam Salt Works.('), a
learned single Jndge of the Gujarat High Court accepted the Allaha-
bad, Punjab a.nd Madhya Pradesh decisions as laying down the
correct law and dissented from the view raken.in the earlier Calcutta
and Madras cases. The learned judge was of the view that appearing
an<! contesting an interim injunction application would not consti-
E tute such a step as would dise·ntitle the defendant to an order under
s. 34. While reaching this conclusion he observed that the question
as to interim relief is decided only on the basis of the prima facie
case and nothing is decided finally. In such a case, therefore, to
prevent a defendant from contesting the interim application on the
pain of losing bi~ right to get the dispute decided by arbitra-
tion may, in a given case, work injustice, and a functional
approach in the matter ' of interpretation of the relevant words is \ ~
called for.

In 'Arjun Agarwal/a v. Baidya Nath· Roy & Ors.,(6) a learned
G single Judge of Calcutta High Court did not follow the earlier
·Calcutta decisions in view· of the decision of this Court in Janki

(!) AIR·t952 Punj. 109. t
(2) AIR 1970 All. 288.
H (3) AIR 1975 Cal. 222.
(4) AIR 1979 Guj. 215.
l') A.I.R. 1980 Cal. 354,
POOi> CORPORATION v. YAl>Av ENGINEER (Desai, J.j 115

Saran's case and agreed w\th the decision in /Jiswanaih Rungta's ·
A
cas~.

In M/s. Bhonrilal Hiralal & Ors. v. Prabhu Dayal & Anr.,(')
a learned single Judge or'the Rajasthan High 'court after a review of
large number of decisions agreed with the Allahabad, Bombay and B
Madhya Pradesh and lat~r Calcutta decisions and held that appear-
ing to contest an interlocutory application is· not a step in the
11rooeedings as would disentitle the .defendant t~ an order under
s, 34. ,
•
We would now refer to the set of decisions which take the c
. ~ contrary view. In Subai Chandra Bhur v. Md. Ibrahim & Anr.(2 ) S.R.
f Das, J:, after referring to Ives & Barker v. Willans,(') and two earlier
' decisions of the Calcutta High Court concluded that in order to
· constitute'a step in the proceedings the act· in question:must be :.
(a) an application made to the Court either on summons ; or (b)
such an act as would indicate , that the party is acquiescing in the
D
method adopted by the other side of having the disputes decided by
the Court. The second test is beyond question invariably followpd
because if the party entitled to tbe benefit of arbitration agreement
• by taking such step in the suit indicates that it is acquiescing inio
• the method adopted by the other side for resolution of dispute, such E
partr cannot at a later stage seek. to enforc~ the arbitration agree-
• ment by praying for stay of the suit. But with respect, merely
·• · making some applications in the. suit without examining the pJ!rpose,
object and implication of making ·the application would not always
.constitute snch step as would disentitle the party making sudh appli-
cation from seeking relief 'under s. 34 on the short grqurid that by F
~merely making the application it has either abandoned jts right to
~""· enforce the arbitration agreement: by praying for stay of suit or has
.- ac<juiesced into the mode adopted by the opposite party for resolu-
tion of dispute. Every application '\by a party in the'.suit has to be
examined keepinglin view the purpose and the object in making the
application and what does the conduct of the party making the G
application disclose. After formulating the aforementioned test the·

(I) AIR 1980 J.laj. 9.
(2) AIR 1943 Cal. 484. H
(3l [1894] 2 Ch. 478.
116 SUPREME COURT llEPORfS [1983] 1 s.c.a.
A l~ilrned judge proceeded to apply the test to the facts before him
with which we are not concerned. This decision was followed by
. the same High Court in Amritraj Kothari v. Go/cha Financiers,(') and
, it was observed that it is difficult to make a distinction between filing
a written statement in suit and filing an opposition to. an interlocu-
tory application in that suit-both ,of them are ;taking step in the
B suit'. The decision in Sansarchand Deshraj was dissented from. It
. may, however be pointed out that"in the later decisions in Biswanath
Rungta and Arjun Agarwal/a, the same High Court after referring' to
the aforementioned {wo . decisions took the contrary view for which
reliance was placed' on the decisiop of this Court in Janki Saran's •
case. The test formulated by the Calcutta High Court in the recent
c decisions is that the step which would disentitle the defendant from .
taking the benefit of s. 34 must be such step unequivocally showing ~"
that the party had acquiesced in the mode of resoiution of the dispute
adopted by the other side or had abandoned its right to enforce the
. '
arbitration agreement. It was further observed that if an injunction
is obtained or a receiver is appointed or a prayer to that effect is
n made, any step taken to get the order vacated or circumscribe the
injunction without in any way touching upon the main dispute in
· the plaint would not be such a step as would disentitle the party
from obtaining stay of the proceedings. To that extent the earlier
Calcutta view is whittled down and the later decisions have adopted
the trend of decisions in other High Courts. •.
.E

The earliest decision of the Madras High Court is P. Gannu
Rao v. P. Thiagaraja Rao & Anr.(2 ) Examining the ambit of the
expression 'taking step in the proceedings', it was held that if some-
F thing is done by the party concerned which is in the nature of an
application to the court it will necessarily come under the category
of a step in the proceedings. After formulating this test the Court
held that when ex parte interim injunction was served upon the
defendant and 'the defendant appears and prays for modification of
the injunction it constitutes a step in the proceedings which would
G disentitle him from obtaining stay of the suit. In reaching this
conclusion the Court amongst others placed reliance on the decision
of Das, J. i~· Subal Chandra Bhur' s case; The ·Madras High Court

•
H (I) A.LR. 1966 Cal. 315 •
. (2) A.I.R. 1949 Mad .. 582.
POOD CORPORATION v. Y'ADAV ENGINEER (Desai, J.) 117

has consistently followed this view in M/ s. Borte~ S. A . .v, Astouic A
.,. Compania Naviors S.V.,(1) & S. Ramalingam Chettiar v. S. Sarves-
waran & .Ors.(')

The Delhi ,High Court in M/s. Dadri Cement Co. & Anr. v.
. M/s. Bird & Co. Pvt. Ltd.,(') after referring to a large number of
B
decisions but particularly lhe Madras cases and early Calcutta cases
ultimately based t~e decision on the facts of the case. The Court
distinguished the decision of the Madhy~ Pradesh High Court in
Sansarchand Deshraj' s case observing that that is the decision based
on the facts o(that case. The Delhi High Court has not addressed .
.itself to the controversy under discussion. c
'
In Kunta Malla Reddy v. Soma Srlnivas !?.eddy & Ors.,(4)
It was held that the expression 'steps in the proceedings' in s. 34
also comprehends step in interlocutory proceedings also. In reaching
this conclusion r~Jiance was placed on the decisions of the Madras
High Court. D
A review of these precedents would unmistakably indicate that
the trend of tbe authorities . points in the direction of not treating
every application made - in the suit ·as a step iu the proceeding nor
~ntering.appearance with a view to contesting the petition for interim
relief such as injunction or appointment of receiver as being steps in E
the proceedings. Therefore, with respect,· the decisions taking the
,..;_
contrary view do not commend to us.
I
It is at this stage that ·we must refer to the decision in Jankl
Sarcn' s case in ~ome detail. In that case J anki Saran_ Kailashchandra
filed a suit against State of U.P. ·and Divisional Forest Officer, F
Bijnor fo~ recovery of damages alleging breach of contract. The
/

summons in the suit issued to the State of U.P. was served on the
District Government Counse'l. On September 2, 19?6, the District
. Government Counsel filed an appearance slip in the Court and also
put in-.a formal application praying for· one month's time for the
purpose of filing written statement. On October 1, 1966 the G
'District Government Counsel filed an applicatioµ under s. 14 of
the Act pleading that there was an arbitration cl~use· in the contr!lct

(I) A.J.R. 1970 Mad. 323.
(2) A.I.R. 1977 Mad .. 189. H
"
(3) A.l.R. 1974 Delhi 223. '
J
(4) A.l.R 1978 A.P. 289.
. I

118 •SUPREME COURT jlEPORTS [1983] I s.c.R.

A
between parties to the suit and the State of U ..P. being willing to
refer the matter to arbitration the suit should be stayed. The trial
court granted the motion for stay of suit. On appeal the High Court
held that the action of the District Government. Counsel in applying
for time to file the written statement amounted to taking a step in '
B the proceedings within the meaning of s. 34 of the Act, and set aside
the order of the trial court and rejected the request for stay of
proceedings. State of U.P. approached this Court against the I
I
order of the High Court. Rejecting the appeal this Court observed
as under :

c "To enabfo a defendant to obtain an order. staying
the suit, apart from other conditions mentioned in s. 34
· of the Arbitration Act, he is required to present his appli-
.·~ .
cation praying for stay before filing his written. statement
or taking any other. step in the suit proceedings. In the
D present case the written statement was indisputably not
filed before the application for stay was presented. The
question is whether any other step was taken in·. the procee-
ding as contemplated by s. 34, and it is this point with
which we 'are dire:ctly concerned in the present case. !~king
other steps in the suit proceedings connotes the idea of-
E • doing soll]ething in a.id of the progress of the suit or sub-
mitting to the jurisdiction of the Court for the purpose
of adjudication of the merits of the controversy in the
suit"'

F The view herein taken not only does not run counter to the view we·
have taken but in fact clearly supports the view because the pertinent
observation is that taking step in the proceeding which would
disentitle a party to obtain a stay of the suit must be doing someth-
ing in aid of the.progress of the suit 9r submitting to the jurisdiction
of the court for the purpose of adjudication of the merits of the
G controversy ill the suit. In other words, the step must aecessarily
manifest the intention of the party tq abandon or waive its right to
go to 11rbitr~tion or acquiesce in the dispute being decided by court.
Jn fact, the view taken in -this case should have quelled the contro-
-\lersy but it continued to figure in one form or the other and that is
ff why we have dealt with the matter in detall.

I
}
FOOD CORPORATION d, YADAV ENGINEER (Desai, J.)

In this context it is advantageous to refer to the provision
contained ins. 4 of Arbitration Act, 1950, of the United Kingdom.
It provides that in order to be eligible to obtain stay of proceedings
the defendant must have taken no steps in the proceedings after
appearance. Analysing what constitutes step in the proceedings,
Inter a/ia, it has been held that the filing of affidavits in answer to
an application by the plaintiff for appointment of receiver does not B
amount to taking a step jn the proceeding (see Zalinoff' v.
Hammond (1) referred to in Halsbury's Laws of England, 4th End,
Vol. 2, para 563 note 12). · Russell on Arbitration, 19th Edn.,
page 183, under t·he heading "steps held not to be in the pro-
ceedings", notes that fi!ing affidavits in reply to plaintiff's affidavits
in support of a motion for a receiver in a partnership action is not a c
step in the proceedings. There are 5-6 other situations noticed by
the author ·which, when individually analysed, would show that the
steps taken with reference to interlocutory proceedings are ordinarily
not held as .steps in the proceedings.
'D
Having thus critically examined both on principle and prece-
dent the meaning to be given to the expressi0n 'taking steps in the
proceedii;igs,' we are clearly oft.he view that unless the sfep alleged
to have been taken by the party seeking to enforce arbitration agree-
ment is ·such 'as would display an unequivocal' intention to ·proceed
with the suit and acquiesce in the method of resolution of dispute E
• adopted by the other party, namely, filing of- the suit and ;thereby
indicate that it has abandoned its right under the arbitration agree-
meJ!t to get the dispute resolved by arbitration, any othe~ step ·
would not disentitle the party from seeking relief under s. 34. Ii
may be clearly emphasised that contesting the application for interim
injunction or for appointment of a receiver or for interim relief by F
itself without anything more would not constitute such step as would
disentitle the party to an order.under s. 34 of the Act.

Reverting to the facts of this case it is crystal clear that ·the
defendants had taken no steps in the proceedings which would G
~ disenti.tle the~ to a relief under s. 34. Suit was filed on June I,
1981, 1mpleadmg twp defendants, Food Corporation of India Jst
defendant. and Shyam Narain Nigam, 2nd defendant, being the
District Manager of the !st defendant Corporation. Alongwith the
plaint a notice. of motion wa:s ta ken out for ex parte ad interim . H
(!) [1898) 2 Cb. D. 92.
120 SUPREME COURT REPORTS [1983] 1 s.c.Ji..

A injunction. The Court issued notice on .the notice of motion and
made it returnable on the next day, i.e. June 2, 1981. When the
matter was placed on Board of the Court on June 2, ·]981; the pro-
ceedings show that the District Manager, 2nd Defendant was served
and appeared through Advocate Shri N.K. Modi. Defendant I was
shown absent with an endorsement 'the summons showing service
B not received back'. Then comes what transpired ·On that day as
.
disclosed in 'the proceedings of the day. The same may be
extracted :
'
"Shri Modi filed Vakalatnama on behalf of defendant
•
No. 2 and prayed for time for reply and· arguments to
c the plaintiff's application for temporary injunction.
Plaintiff's counsel has no objection. Therefore, request (16;'
is accepted. I I
1

For reply arguments and awaiting service on 3rd
June 1981."
D
On-· June 3, 1981, an 1application for stay of suit was made• on behalf
.of the !st .. defendant. under s. 34. Exfacie, the proceedings did not
disclose any step having been taken by the !st defendant in the\
proceedings as would disentitle it to an order under s. 34. 2nd
defendant was 'impleaded in his official capacity. Assuming the
E application ofthe 2nd defendant for filing reply to the interim
injunction application also binds the I st defendant though it was not ,. '
•
served with the summons yet an application seeking time to file reply'
to an interim injunction application cannot be said, t,o be a step in
the proceedings as would display an unequivocal intention to pro-
ceed with the suit or would disclose that the defendants had
acquiesced into the resolution of dispute by the court or had
abandon~d the rights under the arbitration agreement;

-:,
The learned judge also- negatived the prayed for stay for
the additional reason that the 1st defendant had not com-'
G plied with another condition for relief under s. 34. The
learned judge found that 'in the application for stay the
applicant had not stated that at the time when the proceedings were
commenced it was ready and willing to do all things necessary to
the proper conduct of the arbitration and still remains ready .and
H willing to do the same.· The learned judge held after referring to the
avern1ents in the application for stay that there· is no averment to
FOOD co.RPORATION v. YADAV ENGINEER (Desai, J.) 121

that effect. Plaintiff" contesting the application had not raised ·
this contention before the trial court "arid the first appellat~
court and that becomes .evident from what the learned judge
. has stated in the judgment that b.oth the courts have not
taken into account this aspect of the case at all. Obviously .the
learned judge ought not to have permitted the contention while '
hearing a revision petition under s. 115 of the Code of Civil Proce- B
dure. But apart from this,. the finding of 'the learned judge is
cont.rary to record. The application for stay was read over to us
and a copy was submitted for onr perusal. . In para 2 of the appli-
calion it is dearly stated that 'the defendant · is ready and willing
• (ichhuk) for this purpose: It appears that the original application
was in Hindi. The important word used in the application is ichhuk c
whicli, it was agreed, would mean ready and willing. '1t is fol!Qwed
by the expression 'for this purpose' which would imply that the lst
defendant was always ready and. willing to proceed with the arbitra-
tion when commenced and is shown to be ready and willing at the
time of applying for stay. Therefore, the !st defendant had comp-
lied with the requirement of his readiness a:nd. willingness to go· to
D
arbitration. Therefore, the learned judge was clearly in error in ,
interfering with the order of the trial court confirmed by the !st
appellate court on this ground also.

Accordingly we hold- that the learned judge of the High Court E
. was clearly in error in interfering. with the order made by the trial
court and confirmed in appeal granting stay of the ·suit. The judg-
. ment of the High Court is accordingly set aside and th·e one made
by the trial-court and confirmed in appeal is ·restored with no order
as to costs.
F
P.B.R. ppea/ allowed.

>-.. ..
•